Refinance Into One Spouse's Name (most common path)

• The keeping spouse applies as the sole borrower.
• Their income, credit, and assets alone have to qualify under the program's guidelines.
• The new loan pays off the joint mortgage at closing; the ex is fully released from liability when the old loan is satisfied.
• If the keeping spouse cannot qualify alone, options include adding a cosigner, using gift funds to reduce loan amount, or selling.
• Current market rates apply. We work with lenders going to program minimums where allowed on credit, DTI, and reserves.

Using Alimony or Child Support to Qualify

• Most lenders want 3 to 6 months of documented receipt history. We work with lenders going to the most permissive history requirement.
• The income must be expected to continue for at least 3 more years per most program guidelines.
• Documentation: the court order or divorce decree showing the amount and term, plus bank statements showing the deposits.
• Child support is generally grossed up because it is not taxable income, which can boost qualifying income on the application.

Assumption (FHA, VA, USDA loans only)

• Conventional Fannie Mae and Freddie Mac loans are typically not assumable. If the existing loan is conventional, the path is a refinance, not an assumption.
• FHA, VA, and USDA loans can be assumed by the keeping spouse with lender approval.
• The keeping spouse has to qualify on income and credit under the program's standards.
• Lender approval is required. Some servicers have a dedicated assumption department.
• If the existing rate is well below current market, assumption is usually the cheaper path. Closing costs are typically lower than a refinance.

What Happens to Equity

The divorce decree typically dictates how equity is divided. Common arrangements:

• Keeping spouse pays the ex their share via cash-out refinance proceeds.
• Keeping spouse pays the ex over time (less common; the divorce attorney will document this).
• Other marital assets (retirement, taxable accounts) offset the property equity so no cash buyout is needed.
• Both parties sell the home and split the net proceeds per the decree.

A cash-out refinance to buy out the ex is the most common path when one spouse keeps the home and the equity is material. Conventional cash-out tops out around 80% LTV on a primary residence.

Timing

• Most lenders want the divorce decree finalized before they will refinance one spouse solo.
• Some lenders allow a refinance during a pending divorce if the property settlement agreement clearly assigns the property and the decree is on a near-term track.
• Coordinate refinance timing with the divorce attorney. Sometimes the decree's "refinance within X months" deadline is the operative date.
• If alimony or child support is part of qualifying income, you may need to wait until you have 3 to 6 months of documented receipts.

If the Keeping Spouse Cannot Qualify Alone

• Add a cosigner. A parent, sibling, or other family member with strong income and credit can be added as a non-occupant co-borrower in many programs.
• Gift funds. Family gift money can reduce the loan amount, which lowers DTI and may make the file qualify.
• Sell and downsize. A smaller home with a smaller payment may be the right answer.
• Rent for a year. Rebuild credit, build savings, then revisit. Sometimes the best decision is to wait.
• Non-QM programs. Some non-QM lenders use bank statements or asset-based income, which can fit self-employed borrowers whose tax returns understate cash flow.